The escalation of the gas dispute between Ukraine and Russia, which has now shut off deliveries to several neighboring countries and helped push the price of oil back above $50 a barrel for the first time since mid-December, also supported energy stocks around the world.

On Wall Street, the Dow Jones industrial average was up only 17.05 points, or 0.2 percent, at 8,969.94, while the broader Standard & Poor’s 500 index rose 3.14 points, or 0.3 percent, at 930.59.

Both indexes had been sharply higher at the opening bell, with the Dow up more than 100 points at one point, but the news that U.S. factory orders slumped by 4.6 percent in November, nearly double the 2.5 percent drop economists expected, prompted the retreat and more than offset any relief offered by a better than expected survey into the country’s services sector.

In Europe, the FTSE 100 index of leading British shares was up 51.90 points, or 1.1 percent, at 4,639.68, while Germany’s DAX rose 72.15 points, or 1.5 percent, to 5,056.14. France’s CAC-40 rose 54.07 points, or 1.6 percent, to 3,413.99.

In Britain, the FTSE was buoyed by retailers after some better than expected trading updates. Though Next PLC and Debenhams PLC reported falling sales over the crucial Christmas-New Year trading period, investors were relieved that their drops were not as bad as many had feared. Next shares rose 12 percent, while others like Marks & Spencer PLC, which releases its Christmas update on Wednesday, rose more than 4 percent.

“Next’s statement was particularly warmly received as there were no nasty shocks,” said Richard Hunter, a strategist at Hargreaves Lansdown stockbrokers in London.

In Germany, the DAX was lifted by confirmation that luxury carmaker Porsche AG had raised its stake in Volkswagen AG to over 50 percent. Volkswagen, which briefly became the world’s biggest company by market value late last year, after hedge funds got caught short of VW stock to cover investment positions, saw its share price rise 12 percent.

Stock markets have kicked off the New Year in sprightly fashion, partly on relief that 2008 has been put to bed and optimism that an expected near $800 billion package of tax cuts and government spending from the incoming Obama administration may limit the length and depth of the recession in the U.S.

Nevertheless, investors remain fully aware that the economic gloom will hang around for a long time to come.

A raft of economic news this week, most notably Friday’s U.S. jobs report for December, will likely provide markets with their first hurdles of 2009 to overcome.

“While investors say they are braced for choppy conditions, they may yet lose their nerve at those times when the going gets rough,” said Stephen Lewis, an analyst at Monument Securities.

“The early-year rally in equities is unlikely to run far,” he added.

Earlier in Asia, Japan’s Nikkei 225 stock average rose 37.72 points, or 0.4 percent, to 9,080.84 as a weaker yen boosted exporters like Sony Corp. and Canon Inc. Sony jumped over 7 percent, while Canon was up 5 percent. Meanwhile, Toyota Motor Corp. added over 1 percent despite announcing it was halting production at all 12 of its Japanese plants for 11 days over February and March.

Elsewhere in Asia, the Shanghai Composite Index rose 3 percent to 1,937.15, while South Korea’s Kospi rose 1.8 percent and Australia’s key benchmark added 1.5 percent. Hong Kong was the only major regional market to fall, with the Hang Seng index down 53.80 points, or 0.4 percent, at 15,509.51 points.

Oil prices were higher amid ongoing concerns about Israel’s ground offensive in Gaza and mounting worries about gas supplies in Europe as the dispute between Ukraine and Russia escalated. Light, sweet crude for February delivery was up $1.44 cents at $50.25 a barrel on the New York Mercantile Exchange.

The dollar was 1.1 percent higher at 94.41 yen, while the euro traded 1.7 percent lower at $1.3384 as lower inflation in the 16-nation single currency zone stoked expectations that the European Central Bank may cut borrowing costs aggressively next week.

Consumer price inflation in the euro-zone fell to 1.6 percent in the year to December, down from 2.1 percent in November and below the European Central Bank’s target of “below but close to 2.0 percent”.

—

AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.

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